An overview of the global market

Global Market Update: China's Economic Strength, Inflation Trends, and Oil Market Dynamics

Strong industrial output and retail sales data in China, along with news of a significant stimulus plan to boost the housing market, contributed to a sense of optimism in the markets. The MSCI's broadest index of Asia-Pacific shares, excluding Japan, surged by 2.7%, while the Hang Seng in Hong Kong saw a nearly 4% rise. Mainland property developers also experienced a strong rally, with gains of over 5%.​

China's retail sales for October showed a 7.6% increase, a figure that may have been influenced by the Golden Week holiday. However, the real estate sector continues to face challenges, with a year-on-year investment decline of 9.3%. It is expected that Beijing will provide increased support through fiscal and monetary measures to aid in the sector's recovery.

In Europe, stocks recorded gains, with the pan-European STOXX 600 index rising by 0.8 %. This was partly due to UK inflation data, which pointed to a slowdown and impacted sterling. It also supported expectations of an interest rate cut by the Bank of England by the middle of next year. The UK's consumer price index rose by 4.6% in the 12 months to October, a fall from the 6.7% rise in September, increasing the likelihood of a potential rate cut.

U.S. inflation data had a significant influence on global markets, as U.S. headline consumer prices remained flat in October, and core CPI came in below expectations. This supported the view that the Federal Reserve might pause its interest rate hikes.

Late on Tuesday, the House of Representatives passed a bill aimed at avoiding a government shutdown, which will now be sent to the Senate for a vote. If approved by lawmakers, the legislation will then go to President Joe Biden. Without a funding bill in place, the federal government is set to shut down on Friday.

Investors are now awaiting U.S. retail sales data and the producer price index (PPI) on Wednesday for further insights into the Federal Reserve's interest rate outlook.

The International Energy Agency's announcement that the oil market for the current quarter won't be as tight as initially expected was attributed to better-than-anticipated production growth in the United States and Brazil. This assessment contradicted OPEC's view, which emphasized strong growth trends and healthy fundamentals in the oil market.

In addition, the American Petroleum Institute reported a 1.3 million barrel increase in U.S. crude inventories last week, along with a simultaneous 1.1 million barrel rise in stockpiles at the Cushing, Oklahoma hub.
Financial Insights: Inflation, Interest Rates, and Global Diplomacy

On Tuesday, a soft U.S. inflation reading raised hopes that the Federal Reserve is nearing the end of its interest rate-hiking cycle. Furthermore, there was positive economic data from China, reporting better-than-expected retail sales and industrial data for October. This has led to speculation about potential Fed rate cuts, especially following weaker-than-estimated inflation measures (CPI and PPI) published earlier in the week.

In Frankfurt, ECB President Lagarde is scheduled to speak at an event. Additionally, this week will see the release of weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, Industrial Production, and the NAHB Housing Market Index.

However, on Wednesday, the downbeat UK Consumer Price Index (CPI) data had a negative impact on the British Pound (GBP), serving as a tailwind for the GBPUSD cross. Moreover, the GBP's upside potential might be limited due to the possibility of interest rate cuts from the Bank of England in the near future.

The Japanese Yen (JPY) continues to underperform, primarily due to the Bank of Japan's (BoJ) more dovish stance. The BoJ is the only major central bank maintaining negative interest rates and is in no rush to shift away from its massive monetary easing. Traders also remain skeptical about the possibility of Japanese authorities intervening to combat any sustained depreciation of the domestic currency.

With the two inflation reports now behind us, investors will shift their focus to a range of economic data, including jobless claims, industrial production, and housing market data scheduled for Thursday. They will also closely follow remarks expected from Fed officials, including Cleveland President Loretta Mester and New York President John Williams, at various events throughout the day.

The softer tone around U.S. equity futures is driving some haven flows toward precious metals. Additionally, the expectation that the Federal Reserve (Fed) has completed its policy-tightening campaign is providing further support to gold, a non-yielding asset.

Crude oil prices are facing downward pressure due to a larger-than-expected weekly build in U.S. crude stockpiles. The EIA Crude Oil Stocks Change for the week ending on Nov 10 improved to 3.6M from the prior 0.774M, against an expected 1.793M. Furthermore, signs of easing demand in China are contributing to the negative sentiment surrounding oil prices, with China's oil refinery throughput in October showing a slight slowdown compared to the previous month's highs.

In a noteworthy development, U.S. President Joe Biden and China's President Xi Jinping met in person in San Francisco on Wednesday, marking their first meeting in about a year. Both leaders agreed to resume high-level military communication, but the issue of Taiwan remains a sticking point in their relationship.
Global Markets in Flux: Dollar Dips, Euro Rises, and Economic Signals Abound

On Monday, the dollar declined to a two-month low, continuing its downward trend as traders grew confident that US interest rates have peaked, focusing on when the Federal Reserve might start reducing rates. The EUR/USD pair surged over 2% last week, closing above 1.0900 and reaching its highest since late August at over 1.0930 early Monday.

This strength in the euro is supported by hawkish remarks from ECB officials, countering early rate cut expectations. Bundesbank President Joachim Nagel warned against premature rate cuts, and ECB policymaker Robert Holzmann suggested the second quarter would be too soon for such a move.

Meanwhile, the UK faces recession risks, prompting market speculations that the Bank of England (BoE) might lower its 15-year high interest rates. This sentiment was bolstered by disappointing UK Retail Sales figures, potentially benefiting the Pound Sterling (GBP). Investors await further insights from the BoE Monetary Policy Report Hearings on Wednesday and the ECB Monetary Policy Meeting Accounts on Thursday.

In the US, the 10-year government bond yield hit a two-month low at 4.379% on Friday, restraining USD bulls and limiting gains for the USD/JPY pair. Conversely, the Japanese Yen (JPY) received a modest boost following optimistic comments from Japan's Finance Minister Sunichi Suzuki, who sees a unique opportunity to overcome deflation, lending strength to Japan's economy.

Gold prices continue to be underpinned by expectations that the Federal Reserve won't raise interest rates amid easing high-price concerns. Optimism following China's commitment to supporting its struggling real estate sector also influences the gold market, though its safe-haven appeal limits significant downside.

In the oil sector, OPEC+ is reportedly considering further supply cuts at its upcoming meeting on November 26 to bolster prices. Major producers Saudi Arabia and Russia are expected to maintain production cuts into the next year. This follows OPEC's steady 2024 oil demand growth forecast.
Global Financial Shifts: Dollar Weakness, Currency Trends, and Commodity Price Dynamics

The dollar index dropped to around 103.2 on Tuesday, hitting its lowest point since late August. This decline reflects growing bets that U.S. interest rates might start to decrease next year, spurred by recent economic data suggesting a softer economy. The Federal Reserve is expected to hold rates steady in December, with a 30% market expectation of a rate cut by March 2024.

European Central Bank President Christine Lagarde is scheduled to discuss "Inflation kills democracy" in Germany. Simultaneously, the euro is gaining strength, capitalizing on a shift in sentiment favoring riskier currencies over the dollar.

The GBP/USD pair has experienced a steady upward trend for the past three days, reaching a two-month high. This is supported by the Bank of England Governor Andrew Bailey's rejection of immediate rate cut speculations, suggesting that borrowing costs might increase if inflation persists.

The USD/JPY pair is facing continuous selling pressure, dropping to a two-month low. This is influenced by declining U.S. Treasury yields and speculation about the Bank of Japan ending its negative interest rate policy by early next year, potentially strengthening the Japanese Yen.

Gold prices are approaching $1,990 an ounce, nearing their highest level since May. This rise is largely due to the dollar's sharp decline and anticipations of potential rate cuts by the U.S. Federal Reserve next year. However, expectations of more stimulus from China and caution ahead of the FOMC meeting minutes are limiting further gains in Gold.

WTI oil prices are increasing in anticipation of OPEC+'s possible announcement of further supply cuts. Saudi Arabia plans to extend oil production cuts, while OPEC+ is considering additional cuts due to declining oil prices. However, concerns about a slowing global economy are balancing the impact of these potential supply cuts on oil prices.
Dollar Rebounds on Fed's Signal, ECB Flags Financial Fragility, and Sterling Gains Momentum

The dollar recovered from its 2-1/2 month low following the Federal Reserve's meeting minutes, which indicated a continuation of restrictive interest rates, suggesting the end of the rate-hike cycle. The Fed emphasized a "careful" approach, maintaining the current rate setting.

The European Central Bank (ECB), in its bi-annual Eurozone financial assessment, expressed concerns about financial stability, labeling the outlook as "fragile." ECB President Christine Lagarde expects a slight rise in headline inflation in the coming months, emphasizing it's premature to declare victory over economic challenges.

The Pound Sterling awaited the Autumn Statement budget announcement, buoyed by the Bank of England's hawkish stance and Governor Bailey's remarks on maintaining high interest rates for a prolonged period. This outlook provided support for the GBP/USD pair.

Japan’s government anticipates a moderate economic recovery, acknowledging the global slowdown and China's delayed recovery as significant risks.

Gold prices hovered around $2000 an ounce, influenced by the FOMC minutes and ongoing assessments of monetary policy directions.

Oil prices increased following a significant climb in U.S. crude oil stocks, as reported by the API Weekly Crude Oil Stock data. This rise countered the potential impact of OPEC's projected supply restrictions.

Investors are awaiting key economic data releases, including durable goods orders, weekly jobless claims, and consumer sentiment, to calculate further market movements.
Low Trading Volumes Post-Holidays; ECB and BoE Stances, UK Budget, Yen Recovery

Trading volumes are expected to be low following holidays in Japan and the US. Recent data showed that the drop in new US unemployment claims exceeded expectations. ECB officials, including Bundesbank President Joachim Nagel and Vice President Luis de Guindos, maintain a stance against rate cuts until inflation reaches the 2% target, with potential short-term inflation rebounds. Today's PMI data will provide insights into Europe's economic health, which has shown signs of contraction. The euro's movement is largely influenced by sentiments about the end of the US's tightening cycle and potential early rate cuts.

BoE Governor Andrew Bailey emphasized that the central bank's interest rate policy remains steady, with inflation expected to return to the 2% target. Market attention is on the upcoming UK S&P Global/CIPS PMI data for manufacturing and services. UK Finance Minister Jeremy Hunt's autumn budget, predicting slower economic growth, could negatively impact the pound.

The Japanese Yen is recovering against the US Dollar, fueled by expectations that the BoJ might end its long-standing accommodative monetary policy. Gold prices are benefiting from the dollar's decline, approaching the $2,000 level as post-FOMC minutes did not change market expectations of a rate hike in December and a potential rate cut in Q2 of 2024. This reflects a belief that the tightening cycle in developed economies is nearing an end, with economic growth expected to decline, as exemplified by the UK.

WTI prices are falling as OPEC+ unexpectedly postponed a meeting on production cuts. The meeting's delay from November 25–26 to November 30 raises concerns about global crude oil supplies, potentially dragging oil prices lower.
Global Economic Outlook: Currency Shifts, Recession Risks, and Commodity Market Dynamics

The US dollar is losing ground as market players increase their bets that the Federal Reserve (Fed) has concluded its rate-hiking cycle and anticipates a rate cut in mid-2024. The upcoming US PMI data could provide some clues regarding the economic conditions in the US.

There is an increased risk of recession in the Eurozone as the economic downturn extends into the fourth quarter. Surveys in the private sector point to continued weakness among companies, which increases the possibility of a recession. This outlook is reflected in the PMI figures, which, although better than expected, remain in contraction territory. Market participants will be closely watching Germany's Q3 GDP, the IFO survey, and ECB President Christine Lagarde's speech on Friday.

UK PMI figures have surpassed expectations, moving out of the contraction zone. However, unexpected output growth in UK firms has reignited inflation concerns. November data indicates increased activity and stronger inflation pressures, signifying economic resilience but also potentially alarming the Bank of England (BoE). BoE Governor Andrew Bailey has remarked that it is too early to consider rate cuts, suggesting that borrowing costs may need to rise again if inflation turns out to be more tenacious than anticipated. The BoE's narrative of potentially higher rates for an extended period has supported the British Pound (GBP) against its competitors.

In Japan, both headline and core inflation rates have exceeded the Bank of Japan's (BoJ) 2% target for the 19th consecutive month. Additionally, there are expectations of another significant round of pay increases next year, which would support sustained and stable inflation. Consequently, this fuels speculation that the BoJ will likely end its negative interest rate policy in the early months of 2024.

Gold remained stable on Friday, poised for its second consecutive weekly gain, buoyed by a weakening US dollar. The market's growing belief that the Federal Reserve has finished raising interest rates, coupled with looming recession fears in Europe and the UK, could enhance gold's role as a haven in the near term.

OPEC+, a coalition of the world's key oil-exporting nations, has announced a virtual assembly for their forthcoming meeting on the 30th of November. The global oil market is on alert for pivotal decisions on production quotas. Concurrently, Saudi Arabia, a dominant player in the global oil market, intends to extend its reduction in oil production by one million barrels daily into the coming year. The alliance is contemplating additional cuts to combat the recent downtrend in oil prices. Should OPEC+ choose not to implement further reductions in output, it may exert a bearish influence on oil market valuations.
Global Currency Dynamics: Weak Dollar, Hawkish Central Banks, and Market Shifts

Despite increasing US Treasury yields, the US dollar continues its downward trend. Market confidence in an upcoming rate cut and expectations for crucial economic data, such as the Personal Consumption Expenditures (PCE) Index, GDP growth, and the Purchasing Managers' Index (PMI) this week, are contributing to this decline. The forthcoming data is anticipated to provide insights into the economy's resilience and the possibility of a 'soft landing.' Nevertheless, persistent disinflationary pressures and a weakening labor market continue to support this bearish outlook for the dollar.

The euro has been bolstered by indications from European Central Bank (ECB) President Christine Lagarde that monetary policy tightening may pause. Markets are awaiting further comments from Lagarde, scheduled to speak at the European Parliament later today. This, coupled with a shift in market risk appetite and expectations of monetary policy adjustments, is contributing to the euro's gains.

The British Pound (GBP) could see further strengthening following hawkish comments from Bank of England (BoE) Governor Andrew Bailey. In a recent interview, Bailey highlighted the challenges of reducing inflation to 2% and emphasized that it's premature to contemplate rate cuts. He also voiced concerns about the slowdown in the economy's supply side. BoE Chief Economist Huw Pill echoed this sentiment, underscoring the central bank's commitment to a strong anti-inflation stance and the need to maintain tight monetary policy.

The Japanese Yen (JPY) has recently strengthened against the US Dollar, driven by Japan's latest inflation data. The National Consumer Price Index (CPI) for October showed an annual increase of 3.3%, rising from 3.0% in September. Bank of Japan Governor Kazuo Ueda downplayed the possibility of Japan consistently hitting the 2.0% inflation target. Despite acknowledging Japan's moderate economic recovery and a nearly closed output gap, Ueda remains cautious about the sustainability of this recovery and the BoJ's policy direction.

The US Dollar's weakness, amid speculation that the Federal Reserve may halt interest rate hikes, has been beneficial for gold prices. Gold is increasingly seen as a hedge against economic slowdown and recession risks.

Market sentiment remains cautious due to uncertainty over OPEC+'s oil supply cuts, with a key meeting postponed to November 30. Major oil exporters Saudi Arabia and Russia are expected to maintain their 1 million barrels per day supply cut into the next year, while OPEC+ considers additional cuts in response to falling oil prices. If OPEC+ opts not to deepen these cuts, it could lead to downward pressure on West Texas Intermediate (WTI) oil prices.
Global Economic Outlook: Dollar Stabilizes, ECB and BoE Signals, Japan's Inflation Shift

On Tuesday, the dollar index stabilized at around 103.1, its lowest in three months, following weak US economic data fueling expectations that the Federal Reserve might halt rate hikes and possibly cut rates next year. Investors are currently turning their attention to the upcoming PCE prices, a favored inflation gauge by the Fed, along with personal income, spending data, and the ISM Manufacturing PMI for additional insights. Furthermore, multiple Fed officials are scheduled to speak at various events throughout the week.

ECB President Christine Lagarde emphasized ongoing inflation concerns, stating that it's too early to declare victory over inflation. With Eurozone inflation currently double the ECB's 2% target, Lagarde's remarks come ahead of Thursday's expected release of Eurozone inflation data, with estimates of around 3.9%. Despite the ECB's rate increase to 4.0%, the markets anticipate a potential mid-2024 rate cut, although the ECB has not confirmed such plans.

Bank of England Governor Andrew Bailey acknowledged the challenges in reducing inflation to the 2% target, linking recent declines to lower energy prices. He highlighted the importance of curbing inflation due to its impact on households. With the BoE Deputy Governor for Markets and Banking, David Ramsden, set to speak on Tuesday, market futures suggest a possible 25 basis point rate cut by the BoE in September 2024.

In Japan, recent data indicating progress towards sustained inflation sparks speculation about a potential shift from the Bank of Japan's ultra-dovish policy in early 2024.

Gold prices remain steady above $2,000, benefiting from a weaker dollar and lower treasury yields, with the market eyeing this week's PCE data for signs of slowing inflation.

The US Dollar's bearish sentiment, coupled with the upcoming OPEC+ meeting on Thursday, heightens expectations of support for crude oil prices. Speculation revolves around the possibility of OPEC+ extending its oil production cut into 2024.

This OPEC+ meeting occurs amidst a notable decline in crude oil prices due to oversupply concerns and substantial production from non-OPEC countries, particularly the US. Additionally, China's NBS Purchasing Managers Index (PMI) data released on Thursday could impact WTI prices, especially if the data from the world's largest crude oil importer exceeds expectations.
Global Economic Insights: Weak Dollar in Focus with Mixed Economic Signals and Central Bank Guidance

After the weakest monthly result for a year in November, the dollar index is currently lower, although it rose by 0.6% yesterday. Recent data has shown that consumer spending in the US was moderate in October and the annual rise in inflation was the slowest in over 2-1/2 years. The highly anticipated Personal Consumption Expenditures (PCE) Price Index rose 3% year-on-year in October, weakening from a three-month streak of 3.4%, but still above the Fed's 2% target. Fed policymakers indicated on Thursday that rate hikes are likely over, but left room for further tightening if inflation stalls. Investors are now awaiting Fed Chairman Jerome Powell's comments later today and will be analyzing his words closely to assess the interest rate outlook. Attention will also turn to the release of the US ISM Manufacturing PMI, which could influence the markets.

In Europe, Thursday's data showed Eurozone inflation dropping more than expected for the third consecutive month in November, prompting speculation of early spring rate cuts despite explicit guidance from the European Central Bank. However, ECB President Christine Lagarde emphasized that it's not the time to declare victory, given high wage pressures.

Bank of England (BoE) officials have signaled a hawkish stance throughout the week, supporting the Pound Sterling (GBP). There's an estimation that the BoE will maintain higher interest rates for an extended period, especially considering current inflation is more than twice the central bank's target.

Bank of Japan policymakers struck a relatively dovish tone this week, stating it's premature to discuss an exit from ultra-easy policy. Markets believe the BOJ will abandon the ultra-loose policy next year, potentially aiding the oversold yen.

Bets on the Federal Reserve not raising rates again and potentially easing monetary policy by the first half of 2024 continue to bolster the non-yielding gold price. Mixed economic signals from China and a darkening global outlook also seem to support the safe-haven gold price.

WTI prices experienced losses after OPEC+ decided to implement smaller-than-expected voluntary output cuts for Q1 2024. China's Caixin Manufacturing PMI surpassed expectations in November, potentially offering support and strengthening crude oil prices, contrary to the anticipated decline.